Budget 2023 Announces Measures to Combat Financial Crime

In Budget 2023, which was tabled in the House of Commons on March 28, the Government of Canada announced its intentions to bolster measures to deter, detect, and prosecute financial crimes, protect financial institutions from foreign interference, and protect Canadians from the emerging risks associated with crypto-assets. Key aspects of these proposed measures are summarized below.

Amendments to Money Laundering and Terrorist Financing Regime

The federal government aims to address gaps in Canada’s anti-money laundering/anti-terrorist financing (AML/ATF) regime, and strengthen cooperation between orders of government. Budget 2023 announces the federal government’s intention to introduce legislative amendments to the Criminal Code and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to strengthen the investigative, enforcement, and information sharing tools of Canada’s AML/ATF regime.

These legislative changes will:

• Authorize law enforcement to freeze and seize virtual assets with suspected links to crime;
• Improve financial intelligence information sharing between law enforcement and each of the Canada Revenue Agency (CRA) and the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC);
• Introduce a new offence for structuring financial transactions to avoid FINTRAC reporting;
• Strengthen the registration framework, including through criminal record checks, for currency dealers and other money services businesses to prevent their abuse;
• Criminalize the operation of unregistered money services businesses;
• Empower FINTRAC to disseminate strategic analysis related to the financing of threats to Canada’s safety;
• Provide whistleblowing protections for employees who report information to FINTRAC;
• Broaden the use of non-compliance reports by FINTRAC in criminal investigations; and
• Require the financial sector to report sanctions-related information to FINTRAC.

The federal government will launch a parliamentary review of the PCMLTFA this year that will include public consultations. Budget 2023 announces that the federal government will bring forward further legislative amendments, as informed by such public consultations.

Publicly Accessible Federal Beneficial Ownership Registry

In Budget 2022, the federal government committed to implementing a public, searchable beneficial ownership registry of federal corporations by the end of 2023. This registry will cover corporations governed under the Canada Business Corporations Act (CBCA), and will allow access to the beneficial ownership data held by provinces and territories that agree to participate in a national registry. An initial round of CBCA amendments received Royal Assent in June 2022; however, the federal government notes that further amendments to the CBCA and other laws, including the PCMLTFA and the Income Tax Act, will be introduced to implement the national registry.

Modernization of Financial Sector Oversight

Budget 2023 announces the federal government’s intention to amend the Bank Act, the Insurance Companies Act, the Trust and Loan Companies Act, the Office of the Superintendent of Financial Institutions Act, and the PCMLTFA to modernize the federal financial framework to address emerging risks to Canada’s financial sector.

These legislative changes will:

• Expand the mandate of the Office of the Superintendent of Financial Institutions (OSFI) to include supervising federally regulated financial institutions (FRFIs) to determine whether they have adequate policies and procedures to protect against threats to their integrity and security, including protection against foreign interference;
• Expand the range of circumstances where OSFI can take control of a FRFI to include where the integrity and security of that FRFI is at risk, where all shareholders have been precluded from exercising their voting rights, or where there are national security risks;
• Expand the existing authority for OSFI to issue a direction of compliance to include an act that threatens the integrity and security of a FRFI;
• Provide new powers under the PCMLTFA to allow the Minister of Finance to impose enhanced due diligence requirements to protect Canada’s financial system from the financing of national security threats, and allow FINTRAC’s Director to share intelligence analysis with the Minister of Finance to help assess national security or financial integrity risks posed by financial entities;
• Improve the sharing of compliance information among FINTRAC, OSFI, and the Minister of Finance; and
• Designate OSFI as a recipient of FINTRAC disclosures pertaining to threats to Canada’s security, where relevant to OSFI’s responsibilities.

The federal government will also review FINTRAC’s mandate to determine whether it should be expanded to counter sanctions evasion and evolve to include the financing of threats to Canada’s national and economic security.

Canada Financial Crimes Agency

To strengthen Canada’s ability to respond to complex financial crime cases, Budget 2022 announced the federal government’s intent to establish a new Canada Financial Crimes Agency (CFCA) that will become Canada’s lead enforcement agency against financial crime.

Budget 2023 announces that Public Safety Canada is developing design options for the CFCA, working together with federal, provincial and territorial partners and external experts, as well as engaging with stakeholders. Further details on the CFCA’s structure and mandate will be provided by the 2023 fall economic and fiscal update.

Protections from Crypto-Asset Risks

To protect Canadians from crypto-asset risks, Budget 2023 announces that OSFI will consult federally regulated financial institutions on guidelines for publicly disclosing their crypto-asset exposure.

Federally regulated pension funds will be required to disclose to OSFI their crypto-asset exposures. The federal government will also work with provinces and territories to discuss crypto-asset or related activities disclosures by Canada’s largest pension plans, to ensure Canadians are aware of their pension plan’s potential exposure to crypto-assets.

Looking Forward

Goodmans Financial Services Regulatory Group will continue to follow the implementation of these measures.

For further information concerning the measures announced in Budget 2023, and what they might mean from a compliance perspective, please contact any member of our Financial Services Regulatory Group.

The author would like to thank Cathy Costa-Faria, Associate for her assistance in writing this Update.